When assessee offered income on accrual basis over the years, claim of TDS deducted on maturity of bond can not be disallowed – ITAT
In a recent judgment, ITAT Agra has held that when assessee had offered interest income on RBI Bonds on accrual basis over the years, claim of TDS deducted on maturity of bond can not be disallowed.
ABCAUS Case Law Citation:
4777 (2025) (10) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) / National Faceless Appeal Centre in dismissing appeal of the assessee as infructuous.
The assessee had invested in RBI Bonds and Government of India Bonds. The assessee had declared the interest on such bonds on accrual basis in the returns filed for the earlier years and had deposited her tax liability on such interest income in different Assessment Years whose assessments have been completed under section 143(1) of the Act.
On the maturity of the said bonds, the RBI credited the proceed including interest on maturity and deducted TDS u/s 193 of the Act on the entire interest comoponent.
For the relevant Assessment Year, the said interest income having already been offered for taxation in earlier assessment years, were again not offered to taxation, even though the entire interest amount was received during the year on maturity of the said bonds.
However, the CPC while processing the return u/s 143(1) of the Act, accepted the returned income but disallowed TDS credit.
Against the denial of the TDS claim, the assessee filed an appeal before the CIT(A) as well as a rectification petition u/s 154 of the Act before the CPC. The CIT(A) dismissed the appeal of the assessee without issue of any notice, holding that on account of subsequent rectification orders under section 154 passed by CPC the present appeal got merged with those orders and the remedial option available to the appellant was to file appeal against the rectification order u/s 154.
The assessee submitted that the aforesaid decision of the CIT(A) was bereft of the situation where the appeal was filed against order passed under section 143(1) and nothing precludes the assessee to seek remedial action by raising online rectification request before CPC seeking redressal of her grievance under section 154.
It was further submitted that had the grievance been resolved by CPC the appeal filed before CIT(A) could have been withdrawn. It was further submitted that it was not a case that the appeal filed against the Intimation u/s 143(1) was absolutely barred in the scheme of Act.
The Tribunal disagreed with the decision of the CIT(A) in dismissing the appeal of the assessee for the reasons stated in the said order.
The Tribunal opined that the passing of the order u/s 143(1) of the Act by the CPC was a separate order giving rise to a grievance to the assessee, against which the present appeal was filed. Therefore, it was the duty of the CIT(A) to adjudicate the said grievance, by passing an order and giving reasons either accepting the claim of the assessee or rejecting the claim of the assessee instead of dismissing it merely on technical ground, which was not sustainable in the eyes of the law.
The Tribunal noted that in this case, the assessee had furnished computation and details of interest income received on maturity of the RBI bonds offered to tax over the years on accrual basis in terms of section 145 of the Act, and paid taxes thereupon. Apparently, the offering of such income and payment of due taxes had been accepted by the Department.
Accordingly, the Tribunal in the given facts of the case, directed the AO to allow the TDS credit on the said bonds, as claimed by the assessee in the relevant Assessment Year after due verification in term of Rule 37BA(3) (ii) of the Income Tax Rules, 1962, and determine the tax payable or refundable, and pass the order accordingly.
In the result, the appeal of the assessee was allowed.
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